J.C. Penney Returns to Coupons and Marks Up Prices

June 5, 2013

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Zevin said his client is accusing J.C. Penney of having a ticketed price attached to a product, such as a blouse for $30, at which the company never had an intention of selling at that price, "at least not at significant quantities."

He said the company would mark down prices quickly, such as in a day or a week.

"So it's not that they're taking a price and marking it up higher. They're just starting out at an unreasonably high price and selling it at a lower price," he said.

Tod Marks, a senior editor and shopping expert at Consumer Reports, said the accusation against J.C. Penney is reminiscent of past court decisions that determined a product had to be sold for a specific price for a certain number of days per year in order for the retailer to make a claim about percentage savings.

"I haven't heard of marking up to subsequently mark down. I have heard about inflated MSRP stickers that exaggerate the original price so the markdowns look more generous," Marks said.

In 1997, Marks investigated mattress buying and described how ads make mattress sales seem rare, although they occur frequently.

"We discovered a so-called sale promoting 60 percent savings over regular prices, and while the number sounds impressive noted that the original price was essentially mythical," he said.

J.C. Penney did not respond to a request about the lawsuit filed against the company in California.

The practice uncovered by WCPO-TV is not described in the lawsuit filed against J.C. Penney.

The Federal Trade Commission has called the pricing described in the lawsuit as "deceptive," according to the complaint.

The FTC's Code of Federal Regulations states: "Where the former price is genuine, the bargain being advertised is a true one. If, on the other hand, the former price being advertised is not bona fide but fictitious -- for example, where an artificial price, inflated price was established for the purpose of enabling the subsequent offer of a large reduction -- the 'bargain" being advertised is a false one; the purchaser is not receiving the unusual value he expects."

California state law also prohibits false former pricing schemes in the California Business & Professions Code and California Consumer Legal Remedies Act.

A similar lawsuit was filed against Kohl's in 2010 in California. Two weeks ago, the U.S. Court of Appeals for the Ninth Circuit reversed a district court's dismissal of the case that the plaintiff did not suffer any damages or injury.

Antonio Hinojos, a resident of West Covina, Calif., hopes to represent a class of Kohl's customers. Hinojos, who declined to comment to ABC News, used his Kohl's credit card to buy over $500 in apparel and luggage products at Kohl's Glendora in Calif. on May 6, 2010, according to the complaint.

Kohl's did not return a request for comment.

With the Court of Appeal's decision that the Kohl's lawsuit can move forward, attorneys for Kohl's and the plaintiff will next engage in discovery at the district court level.

"We allege that Kohl's essentially lies about its regular original prices and those prices are not set with the good faith of intentionally selling a significant quantity of products at those prices," said Zevin, who also represents Hinojos against Kohl's. [They are] listed to create the illusion of a sale because Kohl's intends to sell the product at a much discounted sale price."

Editor's note: This story originally stated that ABC's affiliate in Phoenix went into a J.C. Penney store and found price tags that had been marked up. The correct TV-station is ABC affiliate WCPO-TV in Cincinnati, which investigated pricing at J.C. Penney stores in Cincinnati. In addition, J.C. Penney's statement in response to the report did not explicitly acknowledge the practice.